Investing in foreign agriculture – whether in the form of stocks, commodities, or debt financing – can be a smart and culturally conscious way to diversify your portfolio. But, like all investments, an investment in foreign agriculture is not without its risks. Learn about some key considerations for making an informed decision before you invest in agriculture abroad.
When looking for stable investment opportunities, one good way to start is by asking the question, “What can’t people live without?” Fads (and the companies that profit from them) come and go, but there are certain enduring elements of our society that have withstood – and will continue to withstand – the test of time. Food, water, shelter: These basics are the building blocks of humanity, and today they are big business around the world.
Let’s talk about agriculture. It was once the domain of noble, salt-of-the-earth farmers who worked the earth by hand and had little choice but to maintain sustainable fields. These farmers still exist in pockets of the developed world and in developing countries around the globe; but, today’s agriculture – or agribusiness – has morphed to include factory farming and micro farms on rooftops and in repurposed cargo containers from New York City to Beijing. As the global population continues to expand, more companies and entrepreneurs are taking an interest in finding ways to profit from the undeniable need for more sustainable agriculture.
So, should you too?
Investing in Foreign Agriculture: The Options
If you are thinking about investing in foreign agriculture, you have a lot of questions to consider. In what type of agriculture do you want to invest? In what type of business model? On which continent? Should you buy stock in a foreign company? Should you invest in commodities or futures? Or, do you want to consider debt financing – perhaps microloans?
1. Types of Agriculture for Foreign Investment
“Agriculture” is a broad term. Saying you want to invest in agriculture is like saying you want to invest in technology or real estate. It’s a good start, but you need to narrow down your options. The primary categories of foreign agriculture investments include:
- Crops – Corn is perhaps the most ubiquitous food item in the world today, but around the world you will find fields growing everything from rice to citrus fruits. Do you want to invest your money in a specific commodity? Or, do you feel more comfortable investing in a farm or corporation that produces a variety of crops?
- Meat Productio – While vegetarianism and veganism are practiced in locations around the globe, the vast majority of the world’s reliance on meat production isn’t likely to end anytime soon. From organic farms to laboratories that produce cultured (synthetic) meat, investment opportunities in this area of agriculture abound.
- Timberland – Dr. Steve Sjuggerud of Stansberry Research in the US has called timberland, “the ultimate agriculture investment.” With greater population comes a greater need for housing, and timber remains among the most-used building materials in the world.
- Water – With some experts predicting a global water crisis during our lifetime (and many countries, such as Saudi Arabia, using far more water than they are able to source domestically), scientists and entrepreneurs in all corners of the world are looking for new ways to supply clean drinking water to those in need.
2. Types of Foreign Agriculture Business Models
Once you decide on a specific sector of agribusiness, the next step in identifying an investment opportunity is to consider the type of business model in which you want to invest. The options include:
- Factory Farms – While factory farming practices have come under scrutiny, there is no denying that factory farms produce more food in less space. Is this ultimately what we will need in the future in order to sustain a swelling population?
- Small and Organic Farms – Despite the growth of factory farming, small farmers are still responsible for much of the world’s agriculture production. Organic, free-range, and other specialty farms serve a significant portion of the market as well.
- Micro Farms – While some might say that micro farms tend toward the “fad” side of the agriculture world, others would say that they will become a fixture in the world of tomorrow.
- Non–Farming Corporations – From timber companies to water companies and cultured meat labs, foreign agriculture investment opportunities far beyond the fields and factories most people think of when they picture traditional agriculture.
- Indirect Agriculture Investment – Farms, factories, and corporations do not run by themselves. They need tractors, equipment, technology, supplies and much, much more. Should you invest in agriculture directly? Or, do you want to consider investing in a company that helps the business of agriculture grow in a particular location or around the world?
3. Locations for Foreign Agriculture Investment
A third, and equally important, consideration is this: Where in the world do you want to invest? When seeking an investment in foreign agriculture, you literally have the entire world to choose from. Here are some key factors to keep in mind:
- Geography – Is the region suited for agriculture development? Does it have the land and other natural resources required to sustain profitable agriculture?
- Political Stability – Is the country or region politically stable? Is there a risk that you could lose your investment due to factors not specifically related to agriculture?
- Development – Is the country developed, developing, or undeveloped? While investing in foreign developed nations may help limit your investment risk, opportunities in developing and undeveloped regions (such as Central America and Africa) may better serve other investment objectives.
4. Types of Foreign Agriculture Investments
The final major consideration for identifying suitable foreign agriculture investment opportunities is to assess the types of investments that are available. Depending upon the sector, type of business, and region in which you wish to invest, potential investment vehicles may include:
- Stocks in publicly traded companies
- Equity investments in startups and private companies
- Real estate investment trusts (REITs)
- Mutual funds and exchange-traded funds (ETFs)
Investing in Foreign Agriculture: The Risks
Of course, all investments carry risks, and there will often be additional risks involved in investing overseas. Before investing in foreign agriculture, it is critical to conduct your due diligence. In particular:
- Know Your Investment Advisor – If you work with a broker or advisor, make sure he or she is registered, ask for references, and do not rely solely on his or her advice.
- Watch Out for Scams – Unfortunately, investment scams continue to be a major concern, and many scam artists specifically target individual investors in alternative markets. Do not invest unless you are confident that the opportunity is legitimate.
- Know the Signs of Investment Fraud – Guaranteed returns, refusals to provide information, and high-pressure sales tactics are all red flags for investment fraud. For more tips, you can review the US Securities and Exchange Commission’s Investor Alert: 10 Red Flags That an Unregistered Offering May Be a Scam.
Contact Jiah Kim & Associates
Jiah Kim & Associates is an international law firm that represents US citizens and foreign nationals in asset protection, estate planning, and other matters. If you have questions about how an investment in foreign agriculture can benefit your overall planning strategy, we can help. To schedule an initial consultation, please call (646) 389-5065 or get in touch online today.
This blog post is written for educational and general information purposes only, and does not constitute specific legal advice. You understand that there is no attorney-client relationship between you and the blog publisher. This blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.